Investing Basics
Balancing Risk and Return

To get a reward when investing, you have to take some risk. Fortunately, there are some ways to manage investment risk, as you see below:

Investing in mutual funds may help to reduce your risk: Mutual funds typically invest in many—sometimes hundreds—of securities. Diversification increases the chance that your investment will perform more evenly as declines in the value of some holdings can be offset by gains in others.

Invest with your goals and time horizon in mind: Match your investment goal with the mutual fund’s goal. For example, if you want an investment with the potential for strong growth, you will probably want to consider a stock fund. But the value of a stock investment is likely to fluctuate more widely over the short term—meaning there will typically be periods of gains and periods of losses. If you have a long time horizon, you can keep your money invested and ride out the setback.

Practice asset allocation: Based on your risk tolerance and investment time horizon, you will want to spread your savings across different types of assets—money market securities, bonds and stocks—to potentially reduce your overall risk.

Review your allocation over time: Once you settle on an asset mix—say 80% stocks and 20% bonds—review that mix at least once a year. If you want to maintain that mix, you’ll need to periodically rebalance your account by making exchanges that will take you back to your target percentages. Ask us for help. Just call 1-800-258-3030 to speak with one of our friendly client service associates.

You may also be interested in the Helpful Tips guide, Handling Investment Risk.